Question

at the beginning of the year, Grillo industries bought three used machines from freeman incorporated. the machines inmediatly wew overhauled, were installed and started operating. because the machines were different, each was recorded separately in the accounts.

   machine A    machine b    machine c

cost of the assets 10600 39800 23600

installation cost    850 3700 2800

renovations cost prior used    650 3300 3800

repairs after production began 500 700    2300

by the end of this year, each machine had been operating 8000 hours

required

1. compute the cost of each machine

2. prepare the journal entry to record depreciation expense at the end of year 1, assuming the following.

machine    life    residual value depreciation method

a 5 years    2600 straight-line

b 20000 hours 2200 units-of-production

c 10 years 1400 double-declining-balance

Answer 1

1) Cost of each Machine

	Machine A	Machine B	Machine C
Original Cost	10600	39800	23600
installation cost	850	3700	2800
renovations cost prior used	650	3300	3800
Total Cost of machine	12100	46800	30200

2) Journal entry

Date	account and explanation	Debit	Credit
	Depreciation expense	25780
	Accumulated depreciation-Machine A (12100-2600/5)		1900
	Accumulated depreciation-Machine B (46800-2200/20000)*8000		17840
	Accumulated depreciation-Machine C (30200*20%)		6040